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08/16/2017

Compensation Work and Skin in the Game

Some fascinating work is being done around navigating human capital risk and uncertainty. I think it could raise some interesting questions about how compensation jobs and functions are defined and organized.

Success for businesses increasingly hangs on their people and the structures they create to guide and support their work. The problem, of course, is that industries and markets can shift quickly and unexpectedly. Your company might respond with changes in pricing, product offerings, branding or its "go to market" approach -- but how quickly can it transform its workforce to deliver on these changes?

How quickly could you (compensation professional) get your head around the differences in skills, practices and behaviors needed? How well could you pinpoint the gaps between what you've got going on today and what is needed tomorrow (or this afternoon)? And how efficiently can you identify the obstacles that your current reward programs -- base pay delivery, incentives, benefit plans and programs -- will toss into the path of the workforce transformation that must now happen?

It's classic Innovator's Dilemma stuff. And I'm thinking about it today relative to the way we structure compensation roles and work.

There's a lot to be said for growing and refining your HR analytics capabilities so that they can tip you off to the make-up of and trends in your workforce, and help you identify and respond to the risks that might exist in the people part of your value proposition. Hopefully we in the compensation profession, as the original data nerds in HR, are taking the necessary steps here.

But I think there's also the reality of how well our compensation jobs allow us to see and understand the day-to-day reality of the work people are doing. The eyeball-to-eyeball, ear-to-ground reality. Skin in the game.

To have skin in the game essentially means that you have some share in the costs and benefits your decisions and actions create for others. Do we? Should we? Should our functions and roles be defined to create some sense of it?

How is the compensation function in your organization structured? Do you -- like some -- have a centralized compensation function that is tucked away in "corporate" where you must rely on HR generalists and advisors to be your eyes and ears on the ground? Or do you -- like others -- have compensation professionals embedded in the different business units where they have more direct contact and a front row seat to the action.

Will this become a bigger deal as the pace of change continues to accelerate and navigating human capital uncertainty becomes both more challenging and more important?

Nassim Taleb -- the guru of risk and uncertainty whose books on the topic include The Black Swan and Anti-Fragile and of whom I am a big fan -- feels so strongly about the notion of skin in the game that it is the topic and title of his next, soon-to-be-published book. I don't have the answer to the question I raise above, but as food for thought I'll leave you with this principle of skin-in-the-gameship courtesy of Mr. Taleb, who holds that skin in the game only happens in decentralized systems.

Principle: It it always vastly easier to macro BS than to micro BS.

Ann Bares is the Editor of Compensation Café, Author of Compensation Forceand Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys reading in her spare time. Follow her on Twitter at @annbares.

Great questions and concepts, Dan - thanks for adding them to my "half-baked" post and idea.

Another avenue for creating "skin in the game" for those of us in the reward field could be via relationships and personal connections. Many of us are separated from those who we endeavor to serve with our efforts and plans - either physically or simply through lack of direct interaction. When we have the opportunity (either because we actively seek it or circumstances force it on us) to better know employees and managers, their aspirations and challenges, quirks and preferences, we are more likely to care about how our work affects theirs and the things they are trying to do. This could be informal interactions and conversations we seek - or more formal things like compensation design teams or steering committees.